Measuring the Economic Impact of Closing a Family Medicine Residency: An e-publication of the National Conferences on Primary Health Care Access

The following paper by Mark E. Clasen, MD, Ph.D., Mary L. Budzak, MD, Carla M. Clasen, MPH, BSN and Willian N. Tindall, Ph.D. launches an occasional series of e-publications on subject matter of the National Conferences on Primary Health Care Access:

ABSTRACT

The authors assessed that the economic impact of closing a family medicine residency and outpatient center in Dayton, Ohio, has cost this community $17,451,000 annually. This cost is the sum of loss of revenue from graduate medical education (GME) Medicare payments to a teaching hospital with residencies, and the absorbed costs from increases in emergency department (ED) visits. The authors argue the displacement of a cost-effective family medicine health center and residency placed an economic burden on an area ill-equipped to absorb and afford it, and this impacted negatively on the health of a community.

BACKGROUND

The greater Dayton, Ohio, area once enjoyed the benefits of a 500+ bed teaching hospital, St. Elizabeth Medical Center, and its integrated family medicine health center (Hopeland) and residency program. For 122 years, St. Elizabeth Medical Center, and for 30 years, Hopeland, served as medical homes for thousands of greater Dayton area families considered as either “urban poor” or as “high risk.”

The St. Elizabeth Family Medicine Residency Program was established in the early 1970’s. This family medicine residency had slots for 12 residents in each of the three training years. Each of its 36 enrollees comprised a diverse and talented group of physicians in-training at a site that quickly earned a reputation for providing premier training in urban family medicine. Archival records indicate more than 270 family physicians completed their residency at St. Elizabeth. This program produced physicians with patient-centered training, which augmented the health and quality-of-life of the greater Dayton area.

This family medicine residency was also well known for encouraging many physicians to establish practices in underserved settings throughout Ohio and the nation. However, in 2000 the hospital abruptly closed and the Hopeland health center was slated for accelerated contraction and closure when the negotiations for a suitable buyer for both the hospital and its ambulatory center broke down.

During the 1990s, the St. Elizabeth Medical Center and Hopeland began to experience financial difficulties. Two of many causes for these difficulties involved poor cash flow from billing practices and an ever growing burden of uncompensated care for the poorest and most vulnerable citizens of Dayton. Consequently, the religious order that managed the hospital and health center decided to sell both.

For several months in 1999 and the first six months of the year 2000, the residency, health center, and community were informed that a for-profit buyer was conducting due diligence analysis and that a quick sale was expected. Relying on this information, a new class of physicians was recruited into the St. Elizabeth Family Medicine residency.

What became a surprise, however, was that negotiations for this sale collapsed in July 2000. While business, community, and civic leaders were interested in saving the hospital, the community was not given the opportunity to make a counter-proposal, and on July 13, 2000, it was announced that the hospital would close in 60 days. The hospital did close on September 13, 2000, but its ambulatory facility did not.

The 12 newly recruited first year family medicine residents and many second and third year residents were able to transfer into other residencies leaving a handful of second and third year residents and some Wright State University School of Medicine, Department of Family Medicine, faculty members behind to wind down the family medicine practice.

The residency program closed completely in 2002, leaving the greater Dayton community to ponder the enormous loss felt among generations of families who relied on this health center for the 122 years of its existence. St. Elizabeth employees were also distraught not only at their job loss, but at their loss of being passionate supporters of the St. Elizabeth mission to care for the poor and underserved. Similarly, Wright State family medicine faculty and 36 residents and their families were distraught, because they too believed in St. Elizabeth’s mission—never believing the hospital, health center, and residency program would be closed so quickly.

The closing of the St. Elizabeth medical complex has raised the question: “What economic perturbations or burdens did the closure of the St. Elizabeth Medical Center and Hopeland bring to the greater Dayton community?”

THE PROPOSAL 

In order to answer the above question, three assumptions were made: (a) the closure of the St. Elizabeth Emergency Center and Hopeland clinic resulted in increased emergency department visits at other Dayton sites; (b) the increase in emergency department visits would immediately emanate from the 40,000 people who annually visited the St. Elizabeth emergency department, as well as incrementally from the 30,000 who annually visited the Hopeland Family Medicine Center; and (c) since 42 capped Graduate Medical Education positions would be lost to the Dayton area permanently, it was proposed to determine whether or not this represented an economic burden to the greater Dayton community.

METHODS

To estimate the financial burden resulting from the loss of a family medicine residency, the authors:

(a) reviewed details of the due diligence documents used by the potential buyers considering purchase of the St. Elizabeth hospital and Hopeland. These documents contained data pertaining to reviews and audits of the federal medical education support payments from Medicare, clinical revenues and expenses, and all personnel costs—including resident and faculty salaries.

Because the “burden of suffering” among users of the St. Elizabeth hospital and Hopeland was large, the residency program received a large hospital disproportionate share (DSH) payment; that plus the combined federal medical education support from Medicare to St. Elizabeth hospital created a total full-time equivalent or FTE revenue stream of $160,000 per resident. (Note: Hopeland itself operated at a loss of $750,000/year, but because of the service revenue and the influx of Medicare dollars, a small surplus for the institution was generated.)

(b) analyzed emergency department (ED) visits throughout the greater Dayton area using data from the Greater Dayton Area Hospital Association (GDAHA). Their data is used by all Dayton area hospitals because of its accuracy and acceptance by area hospitals. The Wright State University College of Science and Mathematics provided statistical assistance analyzing and comparing area ED visits in different years.

Ohio Hospital Association data was used to calculate the average cost of an ED visit in both Montgomery and neighboring Greene counties. This was done to calculate: (a) the average cost of an ED visit which did not result in an admission and (b) the average cost of an ED visit resulting in an admission.

FINDINGS 

(a) When the Dayton community lost all 42 GME slots, this loss in revenue totaled $6,720,000/year. When balanced budget reduction formulae were applied to this amount for the years 2000-2005, the Dayton community had lost $4,805,000 each year without having receipt of federal medical education support from Medicare.

(b) Emergency department usage in the Dayton area had been rather constant from 1990 until July 2000. After 2000 when a significant “safety net of care” was lost and access to culturally appropriate care became constricted, that baseline abruptly curved upward. (Table 1)

Emergency room usage in Dayton, Ohio and surrounding counties

What this suggested to the authors is that without primary, secondary, and tertiary preventive care, through the presence of a family medicine model of comprehensive care, former Hopeland patients became sicker and then sought medical care from area Emergency Departments.

The slopes of ED usage between the years prior to the hospital closure (1998-2000) and those after the closure (2001-2003) differ significantly—and were calculated using GDAHA data. The estimated slope for 1998-2000 was not significantly different than zero (P=0.45). The estimated slope for 2001-2003 was marginally significantly different than zero (P=0.0583). The tests for determining if these two slopes differ significantly is statistically significant (P=0.0091).

These data support the hypothesis that Dayton area emergency department visits were relatively stable in the years prior to 2000, but have increased significantly during the years 2001-2003. In fact, they increased at a rate of about 9,000 visits per year. This slope led the authors to predict an increase of 9,000 more ED visits would occur in 2003 over those in 2002. In fact, GDAHA reports there actually were 19,316 more ED visits in Dayton during 2003. Using the actual figure of 19,316 makes the slope line following the Hopeland closure even more significant (P=0.009). By the year 2004, the slope flattens out. (Table I)

(c) The ED visits by former Hopeland patients not only resulted in greater numbers of area ED admissions, but they were more expensive visits than typical non-admission visits. For this study, however, the authors did not mix the visits resulting in admissions with those that did not. Instead, the authors considered all the ED excess visits “non-admissions”—knowing that the average cost of these non-admissions was $788.

This yielded a very conservative price tag for the aggregate value of these additional visits. By the end of 2004, an additional 17,000 ED visits, as tracked by GDAHA, were being made to Dayton area EDs, presumably driven by the closure of Hopeland.

The 40,000 annual ED visits to the St. Elizabeth Medical Center spread quickly into the community upon the closure of the hospital and they did not factor into the area’s trend of experiencing an escalation in ED visits. Rather, it was the Hopeland patients who initially started the increase and, then as they got sicker and sicker, created a wave of new and increasing demand for ED services.

Thus, since a conservative cost for these visits would be $788 and since it can be estimated that an additional 17,000 visits occurred, a community burden for these additional ED visits would be 17,000 X $788 or $13,396,000. The 17,000 visits is the difference between the average visits to ED in the three years before and after closure of Hopeland.

Finally, the authors estimate the annual cost to the Dayton community by the year 2005 had risen to:

(a) $ 13,396,000 (excessive ED usage charges)

(b) $ 4,805,000 (loss of federal support from Medicare with the balanced budget act (BBA) formulae applied) and

(c) <$750,000> (Operating loss of the Hopeland Center, considered a gain in this scenario or $17,451,000)

In 1999 an average visit to Hopeland created a “cost” of $37/visit. In 2004, a visit to an area emergency department has an average “cost” of $788. This ratio is approximately 21:1

($788/37 = 21:1) and represents the excessive cost of an ED visit versus one made to Hopeland.

Discussion

Is such a large economic burden possible? Certainly, the loss of the GME slots is real, and the funds which followed each slot are real. The authors reduced these amounts to reflect the impact of the Balanced Budget Acts (BBA) over the various years since 2000. The additional ED visits are logical since there was little capacity to absorb the Hopeland patients into other Dayton area clinical settings.

The tables in this report argue that it is the expense of ED visits that are driving up area healthcare costs in Dayton, which could have been avoided by having care delivered at a well-established family medicine unit. This leads to speculation about the relationship between health care costs and the paucity of primary care in the USA, and especially whether or not patients should be directed to an urban family medicine training site, such as Hopeland, for much of the care they are currently seeking from ED departments. (Table 2)

National trends in emergency room use

The authors recognize that numerous confounding variables are operative in this analysis, the most important being the interactions between a chaotic health system and vulnerable people needing care from that system.

There is evidence that the number of visits to emergency departments is soaring nationwide (Table 2), as well as in Dayton, and ED departments are scrambling to meet new demands by increasing capacity.

Thus, it would behoove policy-makers and other healthcare decision makers to consider the alternative of a less costly and more effective family medicine model. The implication for America’s health care system is that a safety net, non-triage, comprehensive Family Medicine training and practice model is cost-effective and has great value.

In addition, it is a model whose real value lies in its ability to provide comprehensive and preventive care which results in non-events, i.e., fewer strokes, heart attacks, earlier detection of cancer, etc. For example, heart failure (HF) can be cost effectively managed in an ambulatory setting. When it is, it creates a reduction in the number of visits made to an emergency department, ultimately saving resources.

As an illustration, if heart failure had been treated at Hopeland, it would have generated a revenue stream of $75 per visit; if that same patient had visited a Dayton area ED, it would have generated a cost of $788; however, if that patient was subsequently admitted to a hospital, that original $75/visit becomes an average $19,000+ admission.

Finally, this commentary is a lament for the reality that a financial contribution to a community by one family medicine health center was considerable even by using conservative assumptions, and now it is gone. Unfortunately, the knowledge of this financial contribution has been done long after the Hopeland’s demise, and this knowledge cannot alter history or turn around the escalation in Dayton ED usage.

The perturbations set off by the closing of Hopeland did send people at risk to EDs. Five years later, the increase in ED usage appears to be flattening, but a higher ED baseline average number of yearly visits will likely become a new norm due to the turbulent dynamics of losing a major safety net family medicine center.